The Problem

A couple were undergoing the process of divorce, and a significant part their wealth was tied up in a property company owned by one of the spouses. The family court ordered that all assets belonging to the couple were to be split evenly between both parties, including the company/properties.

We were instructed by the courts to act on behalf of both parties to facilitate an equal division of the company and the properties (valued in excess of 1.7m).

The Solution

Both parties were consulted to gain an understanding of how they viewed the business, in order to ensure that the correct tax analysis was applied from the start. We determined that the most tax efficient way to divide the business was through a capital reduction demerger.

We applied to HMRC for pre transaction clearance, to obtain agreement in advance that the demerger met certain transaction rules. Upon receipt of this, we prepared a full step by step plan for both parties on how the demerger should be facilitated.

Following this, we provided support and guidance to the parties as each step was implemented, including discussions with their respective accountants and solicitors.

The Result

The business was partitioned into two completely separate companies. Each company was owned and controlled by a single spouse respectively, separately controlling a 50% share of the former property portfolio.

The planning and structure of the demerger meant that no capital gains tax or income tax was payable on the relevant transactions, and only a small amount of stamp duty land tax was payable overall.